Are business incentives worth the cost to taxpayers?

Northern Nevada economic development officials say that they recently lost a manufacturing plant, planned by a company headquartered here, to another state because the other state offered a better incentive—not a tax abatement or government-back bonds but a check—for cash.

There haven't been any reports of Nevada officials seeking authorization to write checks to convince companies to open shop in the state, but lawmakers should keep that incident in mind when they debate the future of such economic-diversification tools as redevelopment districts and STAR bonds.

This raises the question: Why does Nevada even have a Commission on Economic Development? It gives away money (in the form of tax breaks) to favored businesses, but the job of government isn't to pick winners or losers in an economy. Its purpose is to provide a level playing field for all—a.k.a. a low tax and regulatory burden that's the same for every business. The same principle can and should be applied to STAR bonds, which Reno uses to give sales tax money to developers that build in certain areas.

Assemblywoman Marilyn Kirkpatrick, D-Las Vegas, who has overseen the study, said Nevada has fallen into the same trap as many states.

"People were just giving away incentives to bring folks to their community, to draw businesses and be the hub of a certain type of empire," she said. "But nobody was looking at the long-term fiscal impact."

Bonus reading: The author of the last link, Dr. Burt Folsom, has written an absolutely awesome book on the difference between businessmen who relied on government protection and those who relied on innovation to produce a quality product at a good price. It's very applicable to what's happening here in Nevada and it's only 170 pages long.

Victor Joecks is executive vice president at the Nevada Policy Research Institute and oversees the execution of NPRI's strategic plan and policy initiatives. He joined the Institute in 2009 and previously served as its communication director. Under his leadership, NPRI obtained record amounts of state and national media coverage.